If I Leave a Company and Get Severance and Get Hired Again What Happens
This post is temporarily out of appointment. In response to the COVID-xix pandemic, Canada's Employment Insurance rules have been temporarily changed in Canada to permit employees to access EI benefits fifty-fifty when they received a severance package. Read more than here.
Worried about how severance pay affects unemployment benefits? It is truthful that getting a severance package does disrupt EI in two ways:
- Yous cannot get EI until your severance "period" expires. A severance "period" is the corporeality of "months" of pay your severance parcel is worth.
- If you keep EI, and later receive a severance package, every bit many people do, you lot will take to pay Service Canada dorsum for all the EI yous received in your severance period. Service Canada will backdate your severance package as if you got this money the twenty-four hour period you were terminated from piece of work even if you negotiated information technology many months later. Still, the upside is that your entitlements to EI benefits volition be extended for the amount of "time" you paid back, meaning yous can compensate the amounts you had to pay back.
How does severance pay touch unemployment benefits ("EI") in Canada?
The most important effect severance has on unemployment benefits is that individuals cannot receive unemployment benefits until their severance package has expired.
If an individual does receive unemployment benefits before their severance packet has expired, and then they will have to pay back Service Canada all the unemployment benefits money they received while they were still receiving a severance.
When to apply for EI?
In all circumstances, you must apply for EI within iv weeks afterwards your last day of piece of work no matter what. Fifty-fifty if yous accept received severance, or have not received severance, or hired a lawyer to negotiate more severance, or did not receive your ROE, you must apply for EI immediately.
I tell everyone, don't stop up similar this young man, and miss the deadline to apply for EI because you thought you couldn't get EI until your severance was exhausted. This is non true. You become canonical for EI if yous lost your job, not if yous got severance.
Whether or non you received a severance has no outcome on the borderline to apply and you don't need to take a signed severance agreement to employ for EI. You demand zilch but the fact yous lost your job.
After yous apply for EI, and then you lot will bargain with the effect your severance has on your unemployment benefits. But, again, I must stress, ever apply for EI starting time and worry well-nigh the severance issue afterward. While yous apply for EI and periodically thereafter, Service Canada will ask y'all about your severance, so don't worry.
Lastly, keep in mind likewise that you can utilise for benefits even if you have non however received your Record of Employment (ROE).
Severance and unemployment benefits (EI)
After you are approved for EI, if y'all have received a severance package, your EI start twenty-four hours will exist delayed until the end of severance catamenia. However, getting a severance package does not reduce the amount of benefits. If yous are canonical for example 9 months, you lot will however get 9 months EI even if you also got for example 9 months severance. However, the 9 months of EI payments volition only begin 9 months after your termination date (which is how long your severance was for).
After y'all are canonical for EI, and if yous did non receive a severance bundle, your EI payments will start immediately (which is around 28 days afterwards you utilise for EI).
Calculating EI and severance
You must tell Service Canada about your severance in the application for EI. If you lot do not have a severance that is ok simply tell them that.
However, if y'all apply for EI with a severance parcel already signed, although y'all will exist canonical for EI, you lot cannot receive EI payments until your "months" of severance has expired. For instance, if you agreed to a six months' severance package, you can't become EI until six months have passed since the engagement of termination. You will exist approved and in the system, but Service Canada won't start paying you until half-dozen months is upward.
Even if severance is paid as a lump sum without reference to "months" or "weeks", Service Canada will examine your severance lump sum and dissever it by your normal monthly earnings minus deductions etc. at the job yous were permit go from to determine how many "months" or "weeks" of severance you received.
For case, if yous make $80,000 per year, and you got a severance packet lump sum of $40,000, and so, generally, the CRA will make up one's mind that you received a six months' severance packet. This ways y'all can't get EI until 6 months is upward. Y'all can entreatment if you don't agree, even so, which is not complicated. Just clearly and just bear witness them how their calculation is wrong in a letter.
Why does severance affect EI?
Severance is considered "earnings" but like bacon. Severance is essentially pay in lieu of "notice" that people are paid when they are terminated. Employers accept to provide notice to employees when they burn them, just they can provide severance instead of giving them notice. In this regard, severance is basically only the aforementioned salary you get except you don't have to come up to the job anymore. And that'south why Service Canada thinks you should not get EI and severance at the same time. Information technology is the same reason why you lot cannot get EI once you get another job.
What happens to EI if I did not get severance?
If you do not receive severance, you may receive EI immediately and there shall be no effect on your EI eligibility or entitlements.
What happens to EI if I get severance later?
In many cases, individuals do not get severance immediately because they are taking the fourth dimension to negotiate for more severance or sue for more severance.
In this instance, individuals should yet employ for and receive EI while they wait to receive their severance.
However, once the individual and his or employer agree to a settlement for severance, the employee will accept to notify Service Canada of the settlement and pay Service Canada back for all the EI money they received before they got the settlement from their employer. Any monies EI paid to employees who afterwards get a severance is called an "overpayment".
There is no penalty for getting a severance package while you are on EI, only you do have to pay the EI back without interest. Yet, the upside is that you get back those months of entitlements that you paid back. In other words, if you had to pay back iv months of EI, you become 4 additional months of EI.
Calculating EI overpayment
It is non complicated to summate how much coin an employee will have to pay dorsum Service Canada for EI overpayment.
Equally soon as the individual gets their settlement agreement or wrongful dismissal lawsuit award, he or she will accept to go a certificate called a "Discover of Debt" from Service Canada. The Notice of Debt will be calculated by the CRA to make up one's mind how much the individual has to pay Service Canada back.
Phone call Service Canada or head to a Service Canada location to get your Notice of Debt started.
In most cases, a Notice of Debt takes several weeks to complete.
The finished Find of Debt will, more often than not, require an individual to pay dorsum every dollar he or she received in the number of months of severance the settlement or wrongful dismissal lawsuit accolade overlapped with the EI payments. For example:
- Sara was terminated on Jan one.
- Sara did not agree with the severance parcel offered to her by employer on January ane.
- Sara applied for EI on January 1.
- Sara received her first EI check on Jan 29.
- Sara hired a lawyer to negotiate more severance on February 1.
- Sara settled her severance with her employer on Apr ane. Sara agreed to 8 months severance.
- Sara asked Service Canada for a Observe of Debt on April 2. By this time, Sara had been paid EI for two months.
In this scenario, the CRA would upshot Sara a Notice of Debt stating that she has to pay dorsum 2 months of EI payments because her severance settlement entitled her to earnings the whole time she was on EI. Precisely, the CRA considers that her settlement is backdated to the appointment she was terminated. Therefore, fifty-fifty though she just got her severance in Apr, she was "paid severance" for February and March.
Moreover, Sara will not be able to get anymore EI until eight months after her termination (because this is how long the severance packet is).
Paying back the EI overpayment
If you are an employee and your lawyer has negotiated you a improve severance package, the lawyer for the employer will usually require you to obtain a Notice of Debt before they release the settlement funds. Then the employer's lawyer volition pay Service Canada back on your behalf out of the settlements funds. This makes getting paid a signed severance bundle take near a few weeks longer. This is another small-scale factor in how severance pay affects unemployment benefits.
Alternatively, in cases where no lawyers are involved, individuals may pay dorsum the EI overpayment themselves. However, we would recommend paying it back it immediately correct out of the settlement funds.
Volition my EI go extended if I have to pay them dorsum for an overpayment?
Aye, if you go on EI, but then receive a severance, and pay Service Canada back for the EI you got during your severance period, and so you lot will be granted additional weeks of EI eligibility for the exact corporeality of time you paid EI back. For case, let's say:
- Jim was terminated on January 1.
- He went on EI on January 28. He was approved for 9 months of EI.
- He got a severance settlement on March 1 for half-dozen months.
- Jim has to pay dorsum EI for 1 month of overpayment (i.e. the EI he received from January 28 until March 1).
- Jim remains unemployed for 5 more months.
- Jim can become back on EI for his full unemployment benefits entitlements starting the solar day his severance bundle expires (July 1). In other words, even though Jim was terminated on January 1 and he got 9 months of EI, his 9 months of EI only begins after his severance expired.
- Jim still has nine months of EI, not 8, because he paid dorsum the one month he was on EI from the stop of January to early on March. Thus, Jim tin go along EI from July to March of the post-obit year.
Withal, unfortunately, in most cases, individuals never go a chance to ever use their total EI they paid for because by the fourth dimension their severance package has expired, they have constitute new work. This is a major factor in how severance pay affects unemployment benefits. You can't become EI once y'all find a new job.
Is there a fashion to shield settlement monies from EI?
Aye, if your settlement with your employer was for general damages, not "pay in lieu of notice" or "severance", then you don't have to pay back EI. This is considering general damages are not income. They are not "earnings" much like winning a lottery ticket is not earnings.
What are full general damages? Read here about general damages. In brusque, general damages are money your employer has to pay you considering of the way information technology treated you, not money it has to pay you for terminating you, which is money chosen many things like "notice", "pay in lieu of detect", "severance" or "wrongful dismissal damages", simply they are all the same matter, essentially: "earnings".
Beware of simply classifying severance as full general damages. The CRA may examine your claims. At that place must be some legitimate nexus regarding the general damages, such as a homo rights lawsuit or a lawsuit for "castigating damages". However, there does not need to be a terminal verdict, the parties can settle and refer to a portion of the settlement as general damages. Speak to a lawyer almost this as it is quite complicated.
Dutton Employment Law is an employment law grouping in Toronto at Monkhouse Law. Nosotros assist employees and employers in severance and wrongful dismissal. Contact u.s..
Jeff is an employment lawyer in Toronto. He is the Master of the Dutton Employment Police force Group at Monkhouse Police. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and diverse trade journal manufactures.
Source: https://duttonlaw.ca/heres-how-severance-pay-affects-unemployment-benefits/
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